Bernanke’s nomination to a second term in jeopardy

Originally published January 22, 2010 at 10:05 pm
Updated January 23, 2010 at 1:01 am

Federal Reserve Chairman Ben Bernanke's nomination to a second term is in fresh jeopardy because of growing opposition from Senate Democrats, who have been battered by public anger about the economy and the loss of a Massachusetts Senate seat to the GOP this week.

WASHINGTON — Federal Reserve Chairman Ben Bernanke’s nomination to a second term is in fresh jeopardy because of growing opposition from Senate Democrats, who have been battered by public anger about the economy and the loss of a Massachusetts Senate seat to the GOP this week.

At least four Senate Democrats said they will oppose President Obama’s decision to renominate the Fed chairman. Critics of Bernanke, who was named to his first term by President George W. Bush, are pressing the case that he was an architect of policies that helped drag the nation into a period of recession and high unemployment. His term expires Jan. 31.

On Friday, three Democrats — Sens. Russ Feingold of Wisconsin, Barbara Boxer of California and Jeff Merkley of Oregon — said they would vote against Bernanke’s confirmation. A fourth Democrat — Sen. Byron Dorgan of North Dakota, announced his opposition Thursday.

“It is time for a change,” Boxer said Friday, hours after Feingold announced his opposition. “It is time for Main Street to have a champion at the Fed.”

Bernanke received a boost late Friday when Senate Majority Leader Harry Reid, D-Nev., issued a tepid endorsement. He said he had decided to support Bernanke with trepidation and only after he received a commitment that the Fed chairman would take additional steps to increase the flow of credit to middle-class Americans.

Uncertainty about Bernanke’s fate contributed to another day of losses for investors. After a three-day slide that drove the markets down almost 5 percent, the Dow ended the week at its lowest close since early November.

Bernanke faces a 60-vote Senate hurdle because Sen. Bernie Sanders, an independent liberal from Vermont, has placed a “hold” on the nomination. That means a supermajority is needed to bring the nomination to a vote. Confirmation would require a simple majority.

The Obama administration predicted Bernanke will be confirmed. Senate Democratic leaders had hoped to vote on Bernanke this week but backed off after encountering opposition from the caucus Wednesday.

“The anger at the Treasury has been spilling over to the Fed,” said Frederic Mishkin, a former member of the Fed’s board of governors and a close friend of Bernanke. “My view is, Chairman Bernanke helped save the world from depression,” said Mishkin, an economist at Columbia University.

Bernanke, 56, has broad support on Wall Street and among academic economists. If his term as chairman expires, he would remain on the board of governors, where he holds a separate, 14-year appointment that does not expire until 2020. The Federal Reserve Act states that the vice chairman, Donald Kohn now, acts as chairman in the chairman’s absence, but how an absence is defined is not clear.

Material from The New York Times and The Associated Press is included in this report.